Avoiding taxes. Avoiding questions

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Kenneth Roy

A few weeks ago, SR exposed the tax avoidance scheme at Caledonian MacBrayne, which employs most of its crew (around 650) in Guernsey, thus avoiding the inconvenience of employers’ NIC….

Kenneth Roy

A few weeks ago, SR exposed the tax avoidance scheme at Caledonian MacBrayne, which employs most of its crew (around 650) in Guernsey, thus avoiding the inconvenience of employers’ NIC. This imaginative form of tax planning is, of course, well known in the private sector. The mastermind of the Conservative election campaign – not much of a mastermind judging by present evidence – is based for revenue purposes in Belize, wherever that it is. Perhaps he is one of the many Britons stranded by Icelandic ash, that turbulent metaphor for our restless times. But Cal Mac is not in the private sector. Since it receives a handout from the Scottish Government of £90 million a year, you could say that it is public, very public indeed.
     Possibly I am naive in clinging to the notion that subsidy of that order pre-supposes some degree of social responsibility. The prime minister has made it clear that next year’s modest rise in NIC is necessary to pay for essential public services such as health. I wonder how that message is going down in Gourock, headquarters of the ferry operator, and whether the directors, the ministerial appointees, feel a twinge of conscience. Its offshore arrangement not only absolves it of the need to pay the proposed increase, it absolves it of the need to pay employers’ NIC at all.
     What if other organisations dependent on public subsidy behaved in this extraordinary fashion? Audit Scotland, the high-spending outfit which dares to lecture the Scottish Government on expenditure, keeps the books of more than 200 public bodies. Why doesn’t Audit Scotland, Uncle Bob Black and all, float off to Guernsey? What is to stop its clients from doing likewise? The argument of Cal Mac, in so far as it has one, is that if it didn’t save money by avoiding employers’ NIC it would require an additional subsidy to make up the difference. Exactly the same case could be made by the public sector in general.

Since SR published its exposure, we have had several responses. A few specialists wonder to what extent the retirement and other benefits of the crew are protected. Despite Cal Mac’s assurance that it deducts the employee’s share and passes it on to the UK government, there is some scepticism that the employee is fully safeguarded; there is a view that the failure to pay the employer’s side may prejudice the long-term welfare of the workers. What does the company have to say about this disturbing theory? The question assumes that the company will have anything to say.
     A minister of the Church of Scotland may propose to the Kirk Assembly next month that, in these difficult times for the church, the whole ministry should be transferred to Guernsey for NIC purposes. ‘The earth belongs unto the Lord and all that it contains, except the Kyles and Western Isles, for they are all MacBrayne’s’…in that case, the Lord has some rights in the matter, marginal perhaps, but possibly conferring some tax advantages.
     And we have heard from the Labour MSP George Foulkes who, following SR’s investigation and unknown to SR, put a question to the transport minister Stewart Stevenson.
     Their exchange is worth quoting in full:
     George Foulkes: Do the minister and the cabinet secretary share my concern that a publicly owned company has a tax avoidance scheme that uses a Guernsey-based subsidiary? Will the minister raise that matter with Caledonian MacBrayne and insist that it accepts full responsibility for paying employer contributions to national insurance for all its employees in the United Kingdom?
     Stewart Stevenson: Mr Foulkes is sometimes not entirely wise in choosing subjects. The change that was made to create Caledonian MacBrayne Crewing (Guernsey) Ltd was, of course, entirely an initiative conducted under the previous administration for the purposes that Mr Foulkes has just described. If he has not already done so, he will receive a written answer from me very shortly that shows that the subject has not been one on which concern has been expressed until now. However, I am interested that the Labour Party has resiled from its previous decisions.

Let’s ignore the dripping condescension of the first sentence of the answer. Let’s set aside the wilful misunderstanding of the role of individual members and the implication that they, whatever the legitimacy of their concerns, inevitably speak for their party and never for themselves. If that is the basis on which devolution came to Scotland, I wonder why we bothered. Let’s yawn in contempt at the suggestion that all challenge to policies determined before the ruling party came to power can be dismissed on the grounds that it was the other lot wot done it. Dear heavens. Let’s grow up, shall we?
      Instead, let’s examine the slender content of Mr Stevenson’s reply. He argues in effect that the question is of no concern because no one has expressed any concern. This is untrue. We have expressed concern; we have produced many facts to support our concern; we will go on expressing concern until something is done. Mr Stevenson’s answer is also absurd. It implies that politicians have no mind or will of their own, that they are mere facilitators of public opinion.
     The minister has a degree in mathematics, so he should have a grasp of logic. He used to lecture in business studies, so he should be aware of the contribution of employers’ NIC to the economy. He worked for the Bank of Scotland, so he should be conscious of what happens when organisations behave badly. He is a member of a left-of-centre party with a keen social conscience and a commitment to the poor, so he should be sympathetic to the protection of public services for which employers’ NIC helps to pay.
     His answer is abysmal. It is no answer. Cal Mac avoids the taxes. He avoids the question.

Read Kenneth Roy in the Scottish Review